TLAB » Topics » Director Compensation

This excerpt taken from the TLAB DEF 14A filed Mar 17, 2009.

Director Compensation

 

 

The Nominating and Governance Committee is responsible for reviewing and making recommendations to the Board on compensation of the independent directors. The Nominating and Governance Committee has adopted the practice of reviewing such compensation for adjustment every two years. The Nominating and Governance Committee retained the Consultant to serve as adviser on independent director compensation. The Consultant used peer groups (discussed in the Compensation Discussion and Analysis section) to benchmark director compensation and made recommendations on director cash compensation adjustments to the Nominating and Governance Committee. The Consultant also recommended changing the independent director equity compensation under the Company’s Amended and Restated 2004 Incentive Compensation Plan (Incentive Compensation Plan). The Consultant recommended eliminating the initial equity grant and changing the annual grants from fixed share amounts to fluctuating amounts based on share value. The overall philosophy for independent director compensation is to utilize compensation elements consistent with the executive compensation elements (a combination of cash and long term equity components). Recommendations on cash compensation and equity were adopted and will go into effect in 2009. The compensation mix is intended to approximately target the 50th percentile of the market, however, even with the adjustments made for 2009, the total compensation for the Company’s independent directors will be below the 50th percentile.

This excerpt taken from the TLAB DEF 14A filed Mar 19, 2008.
Director Compensation
 
In May 2007, as part of its review of the compensation of our independent directors, the Nominating and Governance Committee consulted with the management of the Company and with the Consultant, Pearl Meyers & Partners, regarding independent director compensation. The Consultant followed a process substantially similar to the benchmarking process, including the same peer groups, used for determining the Company’s executive Compensation and made recommendations to the Committee. As a result of this review the Committee recommended and the Board approved a number of changes to director compensation effective for 2007. The changes included increased annual retainers for the independent directors and the committee chairpersons as well as a different equity compensation package.
 
For 2007, each independent director earned an annual retainer of $40,000 and a fee of $1,500 for each Board meeting attended in person and $1,000 for each substantive telephonic Board meeting. Additionally, each independent director earned a committee meeting fee of $1,000 for each committee meeting attended in person and $500 for each substantive telephonic meeting. The chairperson of the Compensation Committee earned an annual retainer of $8,000. The chairperson of the Nominating and Governance Committee earned an annual retainer of $6,000. The chairperson of the Audit and Ethics Committee earned an annual retainer of $12,000. No other additional retainers for committee members were earned during 2007. The directors are given the opportunity to allocate their annual retainer and meeting fees into the Company’s deferred income plan, although no director elected to do so in 2007. Such allocation can be in the form of cash or stock units (each of which represents the right to receive a share of Company Common Stock) as requested by the director making the deferral. Directors who also serve as officers of the Company do not receive the director compensation outlined in this section.
 
Beginning in May 2007, each independent director received 15,000 non-qualified stock options and 5,000 restricted stock units (RSUs) from the Plan, vesting one year from the grant date. This annual grant is made on the last day of the month of the initial grant received by each independent director. Because certain directors had received an annual grant prior to the May 2007 change in the number of RSUs awarded, these directors received a one time 3,000 RSU grant on May 31, 2007.
 
For 2008, each independent director not previously serving as a director shall receive an initial non-qualified stock option grant to purchase 10,000 shares of the Company’s stock and a 5,000 RSU award


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under the Plan on the last day of the month such person is elected as an independent director. One-third of the initial stock option and RSU awards become exercisable in cumulative annual installments. If such person is still serving as a non-employee director, such person will be granted a stock option to purchase 10,000 additional shares as well as an RSU award of 5,000 shares each year thereafter on the last trading day of April. The annual stock options and RSU awards become fully exercisable one year from the date of grant.
 
In addition, the Company reimburses its directors for reasonable expenses in connection with attendance at Board and committee meetings and the Company’s annual stockholder meetings.
 
If a director ceases to be a director of the Company for any reason other than death or disability, stock options held by such director may be exercised, subject to the expiration date of the stock options, for three months after such termination, but only to the extent such stock options were exercisable on the date of termination. If a directorship is terminated because of disability, the stock option may be exercised, subject to the expiration date of the stock option, for up to three years (depending on the plan and award agreement governing that option) after such termination, but only to the extent the stock option was exercisable on the date of disability. In the event a directorship is terminated due to the death of a director, the stock option may be exercised, subject to the expiration date of the stock option, for up to one year after such termination, and such director’s unvested stock options shall fully vest. Stock options granted to non-employee directors under the 2004 Incentive Compensation Plan are not transferable.
 
The Nominating and Governance Committee is responsible for establishing stock ownership guidelines for the independent directors. In October 2005, the Committee adopted guidelines that require each independent Board member to own stock valued at four times the annual retainer paid to the independent directors. The stock ownership guideline is to be met within five years after October 2005 or a director’s initial election to the Board if initially elected after October 2005. As of year-end 2007, each director is on target to meet the ownership guidelines within the initial five-year compliance window.


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Director Compensation

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For 2005, each independent director was paid an annual retainer of $30,000 and a fee of $1,500, plus expenses, for each Board of Directors meeting attended in person and $1,000 for each substantive telephonic Board meeting. Additionally, each independent director was paid a committee meeting fee of $1,000 for each committee meeting attended in person and $500 for each substantive telephonic meeting. The chairpersons of the Compensation Committee and the Nominating and Governance Committee each received an annual retainer of $4,000. The chairperson of the Audit and Ethics Committee received a retainer of $8,000. No other additional retainers for committee members were paid during 2005. The directors are given the opportunity to allocate their annual retainer and meeting fees into the Company’s deferred income plan. Such allocation can be in the form of cash or stock units (each of which represents the right to receive a share of Company Common Stock) as requested by the director making the deferral. Directors who also serve as officers of the Company do not receive the director compensation outlined in this section.

Each non-employee director not previously serving as a director is granted a stock option to purchase 10,000 shares of the Company’s stock under the Company’s 2004 Incentive Compensation Plan on the date such person is elected as a non-employee director. One-third of the initial option grant becomes exercisable in cumulative annual installments. If such person is still serving as a non-employee director, such person will be granted a stock option to purchase 15,000 additional shares as well as a restricted stock unit award of 2,000 shares each year thereafter on the anniversary of the last day of the month in which the initial option was granted. The annual stock options and restricted stock unit awards granted on such anniversaries become fully exercisable one year from the date of grant. During 2005, only non-employee directors previously serving as directors were elected to the Board of Directors. As discussed above, Linda Beck (a non-employee director) was elected to the Board of Directors in January 2006.

If a director ceases to be a director of the Company for any reason other than death or disability, options held by such director may be exercised, subject to the expiration date of the options, for three months after such termination, but only to the extent such options were exercisable on the date of termination. If a directorship is terminated because of death or disability, the option may be exercised, subject to the expiration date of the option, for up to one year (three years for terminations due to a disability) after such termination, but only to the extent the option was exercisable on the date of death or disability. In the event a directorship is terminated due to the death of a director, such director’s unvested options shall vest 100%. Options granted to non-employee directors under the 2004 Incentive Compensation Plan are not transferable.

The Nominating and Governance Committee is responsible for establishing stock ownership guidelines for the independent Board members. In October 2005, the Committee adopted guidelines that require each independent Board member to own stock valued at four times the annual retainer paid to the independent directors. The stock ownership guideline is to be met within five years after October 2005 or a director’s initial election to the Board if initially elected after October 2005.

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